1 Springfit Corporation Bonds Piryable Year 2 Journal Entries Final Questions SpringFit Corporation You are an accounting item working for Spring Fit Corporation. You have recently been assigned to help one of the accountants who is doing an internal aude of the business. You will be assisting with a review of the payables issued by Spring Corporation Your first task is to review the previous year's journal entries shown below Journal Entries, Year 1 PACE 15 JOURNAL DESCRIPTION POST Jan1 Cash 1063060.00 Premium on Bonds Payable 62060.00 Bends Payable 10000000 hn. 50 Interest Expense Premium on Bonds Payable Cash M1 Cash 1939700 3,305.00 22,500.00 1921.180.00 Root Pahle R SpringFit Corporation Bonds Payable Year 2 Journal Entries Final Questions SpringFit Corporation 7 Jul. 1 Cash 1,921,280.00 Discount on Bonds Payable 78,720,00 9 Bonds Payable 2,000,000.00 10 Oct. 1 Cash 1,100,000.00 11 Notes Payable 1,100,000.00 12 Dec. 31 Interest Expense 19,397.00 13 Premium on Bonds Payable 3,103.00 14 Cash 22,500.00 15 31 Interest Expense 16,500.00 16 Interest Payable 16,500.00 17 31 Interest Expense 41,560.00 18 Discount on Bonds Payable 6,560.00 19 Cash 35,000.00 20 20 31 Income Summary 96,854.00 96,854.00 21 Interest Expense SpringFit Corporation Bonds Payable Year 2 Journal Entries Final Questions SpringFit Corporation Bonds Payable Review the journal entries on the SpringFit Corporation panel, then answer the questions below. 1. Assuming that no bonds had been issued prior to Year 1, how many different bonds appear in the journal entries for this year? 12 2. Which entry shows bonds issued at a contract rate lower than the market rate of interest? Choose the date. 13. How much interest was paid during the year on the bonds in (2) above? $ 4. What is the carrying amount of the bonds in (2) above at the end of the year? $ 5. Which entry shows bonds that sold for more than their face amount? Choose the date. 6. How much interest was paid during the year on the bonds in (5) above? 7. Assuming that straight-line amortization is used for the bonds in (5), what is the bond life? 8. What is the carrying value of the bonds in (5) above at the end of the year? S 9. Considering only the Year 1 journal entries, how much interest was probably accrued on the note payable issued during the year? S Fit Corporation Bonds Payable Year 2 Journal Entries Final Questions Year 2 Journal Entries You have been asked to continue your work on the Spring Fit Corporation audit. Below are the journal entries for the current year. Journal Entries, Year 2 JOURNAL DESCRIPTION PAGE 23 DATE 1 POST. REF. DEBIT CREDIT 2 3 4 5 Jun. 30 Interest Expense Premium on Bonds Payable Cash 30 Interest Expense Discount on Bonds Payable 19,397.00 3,103.00 22,500.00 41,560.00 6,560.00 6 Cash 35,000.00 7 30 Bonds Payable 2,000,000.00 8 Gain on Redemption of Bonds 41,000.00 mework Print Item Fit Corporation Bonds Payable Year 2 Journal Entries Final Questions Year 2 Journal Entries 7 B 9 10 30 Bonds Payable Gain on Redemption of Bonds Discount on Bonds Payable Cash 2,000,000.00 41,000.00 65,600.00 1,893,400.00 11 Sep. 30 Interest Expense 49,500.00 17 Interest Payable 16,500.00 13 H 14 15 Notes Payable Cash Dec. 31 Interest Expense 251,451.00 317,451.00 12,728.00 16 16 Interest Payable 12,728.00 17 31 Interest Expense 19,397.00 18 Premium on Bonds Payable 3,103.00 19 19 Cash 22,500.00 20 20 31 Income Summary 142,582.00 21 Interest Expense 142,582.00 IngFit Corporation Bonds Payable Year 2 Journal Entries Final Questions Year 2 Journal Entries 13 e 14 Notes Payable Cash 251,451.00 317,451.00 15 16) Dec. 31 Interest Expense Interest Payable 12,728.00 12,728.00 17 31 Interest Expense 19,397.00 18 Premium on Bonds Payable 3,103.00 19 Cash 22,500.00 20 20 31 Income Summary 142,582.00 21 Interest Expense 142,582,00 22 22 31 Bonds Payable 500,000.00 23 3 20 Premium on Bonds Payable 24,824.00 24 Loss on Redemption of Bonds 20,600.00 15 25 Cash 545,424.00 SpringFit Corporation Bonds Payable Year 2 Journal Entries Final Questions Spring Year 2 Journal Entries Bo 13 Notes Payable 251,451.00 Re 14 10 Cash 317,451.00 11 15 Dec. 31 Interest Expense 12,728.00 1. 12 2. 13 3. 16 12 16 Interest Payable 12,728.00 17 31 Interest Expense 19,397.00 14 4. 18 Premium on Bonds Payable 3,103.00 5. 15 19 Cash 22,500.00 6. 16 220 20 31 Income Summary 142,582.00 7. 21 17 Interest Expense 142,582.00 18 19 8. 9. 223 31 Bonds Payable 500,000.00 23 23 Premium on Bonds Payable 24,824.00 24 20 Loss on Redemption of Bonds 20,600.00 21 23 25 Cash 545,424.00 ng Corporation Bonds Payable Year 2 Journal Entries Final Questions Final Questions Considering the journal entries for both years, answer the questions below 1. What is the yearly payment amount required for the note payable? (Assume it is an installment note 2. What is the interest rate on the note payable? 3. Were the bonds in the entry on Dec. 31 of Year 2 redeemed at maturity? 4. You suspect there is an error in one of the bond redemption entries. Assuming that the amounts are comect, which entry is questionable? 5. Why do some bonds set below face value? 6. Which of the following items are amortized? Check all mat apply Bonds Future cash receipts Redemption amount ann of the hand Why? Final Questions 5. Why do some bonds sell below face value? 6. Which of the following items are amortized? Check all that apply. Bonds Future cash receipts Redemption amount It depends on the face value of the bond Interest expenses Discounts Contract rate of interest Premiums